Holding Deposit vs Tenancy Deposit: Complete Guide to Rules & Refunds

Paid a holding deposit for a London rental? It reserves the property while the landlord completes other necessary checks. But will you get it back? In England, a holding deposit is usually capped at one week’s rent. It can be refunded as long as you follow the rules and provide correct information about yourself. 

This guide from Real Estate Agents London explains the rules of holding deposits landlords and tenants need to know before renting in 2026.

What is a Holding Deposit and What Does it Reserve?

A holding deposit is a small, one-off payment a tenant pays to take a property off the market while the landlord or agent carries out checks, including credit checks, right to rent checks, and references from previous landlords or employers. You are not paying a fee for the agent’s time. Basically, it’s a way of showing that you are serious about renting the property. In return, the landlord agrees they won’t offer the property to other applicants while your checks are being carried out, in short, reserving the property for you. 

It is counted as part of the money you need to pay when you move in. Once you sign the tenancy agreement, it goes towards your first month’s rent or tenancy deposit. So, you do not normally lose the money. 

Pay the holding deposit → Reserve the property → Complete the checks → Use money for rent or deposit 

How Much Can a Landlord Charge for a Holding Deposit? (One-Week Rent Cap)

Under the Tenant Fees Act 2019, a landlord or agent can ask for a maximum of one week’s rent as a holding deposit. This cap applies to the whole tenancy, not each tenant. So, if you are renting with three friends, each of you doesn’t have to pay separately. One payment covers the whole group.

How to Calculate the Cap

Weekly rent = (Monthly rent × 12) ÷ 52

The formula is simple, but a mistake people commonly make is to divide the monthly rent by 4 because they think a month is roughly four weeks. But it isn’t; it’s closer to 4.33. So using ÷4 gives an amount higher than the actual legal cap.

Let’s say you are renting a flat in East London for £2,200 a month. 

£2,200 × 12 = £26,400 (annual rent)

£26,400 ÷ 52 = £507.69 (one week’s rent)

So, the maximum holding deposit would be £507.69. Dividing by 4 gives £550, which is too high. This small difference matters. Asking for more than one week’s rent could mean the landlord or agent is charging more than the legal cap under the Tenant Fees Act, which counts as a breach. 

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When the Cap Does Not Apply

The one-week cap applies to most residential tenancies covered by the Tenant Fees Act 2019. However, there are some exceptions:

• Company lets, where a business rents the property rather than an individual
• Tenancies with an annual rent above £100,000
• Holiday lets and licences to occupy, including some lodger arrangements

Not sure if the cap applies to you? Check the type of tenancy agreement you are signing or ask your landlord or letting agent.

Holding Deposit vs Tenancy Deposit vs Rent in Advance

Don’t mix up these three payments, because each works differently and has a different purpose. 

Unlike a tenancy deposit, a holding deposit does not need to be protected in a deposit protection scheme. Learn more about how these schemes work.

How Long Does a Holding Deposit Last?

A holding deposit cannot be kept indefinitely. Once paid, landlord and tenant normally have a 15-calendar-day deadline (starting from the date the deposit is paid) to decide if they are going to rent out the property or not. Let’s say the referencing or other checks take longer than expected; the deadline can be extended as long as both sides agree in writing. A simple email confirming the new date is usually enough.

If the deadline passes without the tenancy status being agreed, the holding deposit will need to be returned. However, there are four specific situations where the landlord may be legally allowed to keep it. 

Four Reasons a Landlord Can Legally Keep a Holding Deposit Under the Tenant Fees Act 2019

• The tenant or guarantor withdraws from the tenancy. For example, they change their mind and decide not to go ahead.
• The tenant fails a right to rent check. They cannot prove that they have the legal right to rent in the UK.
• The tenant provides false or misleading information that affects the landlord’s decision to let the property, such as false information about their income or employment.
• The tenant fails to agree to the tenancy by the deadline. 

If the landlord or agent decides to keep the deposit, they must give the tenant written notice within 7 days and explain the reason to give them a clear explanation of what happened to their money.

Can a Holding Deposit Be Non-Refundable?

Under the Tenant Fees Act 2019, a holding deposit is a refundable payment. Landlords or letting agents are not allowed to label it as “non-refundable” in a property listing or tenancy terms. The money can only be kept if one of the legal reasons for retaining it applies. So whether you get the money back depends on what happens during the letting process, not what’s written in the listing.

What Changed for Holding Deposits on 1 May 2026 Under the Renters’ Rights Act

The Renters’ Rights Act 2025 brought several new rental rules into force on 1 May 2026. However, the rules for holding deposits stayed the same. You still have the one-week cap, the 15-day deadline and the same rules on when a landlord can keep the deposit. 

Renting changes do not alter the holding deposit rules, but some can affect what happens before a tenancy starts.

• Rent in advance: Landlords cannot ask for more than one month’s rent in advance.
• Rental bidding: Landlords and agents cannot ask tenants to offer more than the advertised rent.
• Discrimination: Applicants cannot be refused because they receive benefits or have children.

Penalties If You Keep a Holding Deposit Unlawfully

Charging more than the legal cap is an unlawful fee. A first breach can lead to a fine of up to £5,000. A further breach within five years can become a criminal offence, with a financial penalty of up to £30,000 as an alternative to prosecution.

Keeping a holding deposit without a legal reason is treated differently. Even for a repeat breach, it remains a civil offence, with a financial penalty of up to £5,000.

So keep proper records to avoid fines and for the sake of compliance. 

What to Do If Your Holding Deposit Is Not Returned

Deadline has passed, but you still have not received the deposit even though the landlord has no legal reason to keep it. There are a few steps you can take.

Ask for the refund

Contact the landlord or letting agent in writing and ask when your holding deposit will be returned. Mention the relevant deadline and keep a copy of your message.

Make a formal complaint

If you don’t get a response, follow the agent’s formal complaints procedure. Keep copies of all emails and messages.

Contact the redress scheme

If the agent does not resolve your complaint, you can take it to their approved redress scheme, such as The Property Ombudsman or the Property Redress Scheme.

Contact your local council

If you believe the landlord or agent has breached the Tenant Fees Act, your local council’s Trading Standards or housing team may be able to investigate.

Consider the First-tier Tribunal

If you still cannot recover a holding deposit that was wrongly kept, you may be able to apply to the First-tier Tribunal (Property Chamber). Check the current requirements before applying.

How to Spot a Legitimate Holding Deposit Request & Avoid Rental Scams

Rental scams can be especially concerning in a fast-moving market like London. A property that looks like a great deal can create pressure to pay quickly, so it is worth checking a few things before sending any money.

Signs of a Legitimate Request

• You have viewed the property in person or through a trusted representative before being asked to pay.
• You can verify the landlord or letting agent and, if it is an agent, check that they belong to an approved redress scheme.
• You receive clear written details of the payment.
• The requested amount is not more than one week’s rent cap and matches the advertised rent, too.

Holding Deposit Red Flags

• Ask to pay before you have viewed the property, or are told that a viewing is not necessary.
• You are pressured to pay immediately. 
• They tell you to transfer money to a personal bank account without giving proper paperwork or clear details.
• Without any explanation or reason, ask for a holding deposit of more than 1 week’s rent cap. 

Need Help With a Holding Deposit?

A holding deposit is not the same as a tenancy deposit or rent in advance. There are clear rules on how much can be charged, how long it can be held and when it must be returned. If these rules are not followed, it can lead to unnecessary disputes.

At Real Estate Agents London, we help landlords and tenants understand the holding deposit rules, from working out the correct amount to handling refunds and retention. We keep the process clear, so less chance of confusion or unexpected issues.

Holding Deposit FAQs